LSI Hits 52 Week-High - Analyst Blog

By: Zacks.com

Posted: 1/7/2014 10:53:00 AM

Referenced Stocks: AVGO;CSCO;LSI;WDC

Shares of
LSI Corporation
(
LSI
) hit a new 52-week high of $11.05 on Jan 6 and eventually closed
at the same price. The closing share price represents a strong
one-year return of 53.9% and a year-to-date return of 0.5%.
Average volume of shares traded over the last 10 days (13,962K)
increased from the average volume of shares traded over the last
three months (11,403k).

This Zacks Rank #3 (Hold) company has a market cap of $6.06
billion with long-term earnings growth expectations of 17.7%.

Growth Drivers

The current optimism surrounding the shares comes on the news of
its acquisition by
Avago Technologies
(
AVGO
) for $6.6 billion in cash. Per the deal, LSI shareholders will
receive a cash payment of $11.15 for each LSI share. The
transaction is expected to be completed within the first half of
2014, subject to regulatory approvals and fulfillment of
customary closing conditions.

It is worth noting that with the announcement of the deal, LSI
shares jumped 38.6% to close at $10.96 on Dec 16. This
substantial jump has resulted in a year-to-date return of 45.8%
on LSI shares.

We believe that LSI was a potent acquisition target as the
company has a broad range of products that enables it to serve a
diverse clientele in the hard disk drive (HDD), server and
networking end markets. Also, the company's association with
CiscoSystems, Inc.
(
CSCO
) in the networking space is a positive.

Moreover, LSI's product launches and higher sales of flash-based
products are expected to provide adequate support to revenue
growth. In addition, LSI's rapid traction in the growing
PCIe flash adapter market segment coupled with continuous share
buyback and dividend payout are some of the catalysts driving the
stock.

On Oct 23, LSI reported modest third-quarter 2013 results with
the top line lagging the Zacks Consensus Estimate but the bottom
line matching the same. In addition, the continuing macro
uncertainty, competition from its peers, declining PC market and
the company's conservative guidance are near term concerns.

Western Digital Corporation
(
WDC
) is a better-ranked stock in the technology sector with a Zacks
Rank #1 (Strong Buy).